Goodbye Japan, Hello Korea

As the government and Bank of Japan constantly survey the marketplace for speculation while intervening en masse with ever-decreasing levels of effectiveness, we thought the following charts would highlight the impact of the relative strength of the JPY. Of course, in the past, at least the trade surplus (thanks to these legacy companies) used to provide incremental capital into the country but now even that is gone. As Credit Suisse notes, "the TWI of the JPY has appreciated by more than 40% post crisis – even more than the CHF! But it is the relative strength versus the KRW that is really hurting Japanese firms. The Won plummeted sharply post crisis and has recovered nowhere near pre-crisis levels. Some of this shift in relative competitiveness may be reflected in the market cap of Samsung versus that of major Japanese tech firms. Samsung is more than three times the size of Japan’s top technology firms."

Since the crisis, Samsung has overwhelmed the largest 5 Japanese Tech firms...

It was not always this way...

And in context - here is AAPL...

Why is this a concern? Because whereas in the past Japan's economy at least had a source of endogenous capital courtesy of its trade surplus to offset all the other drains of domestic capital, this is no longer the case as we showed recently.

This means that the government is now effectively the only source of capital to offset all other Current Account outflows. This also means that Japan will be forced to monetize more and more, issue more and more debt, even as its population gets older and older and is forced to withdraw ever more savings, shrink the financial system, and sell ever more securities, thus finally accelerating the collapse of the Japanese monetary neutron star's 30+ year implosion into what, inevitably, becomes a black hole.